Land Flashcards
Chapter 14
define land in an economic sense!
land , as a factor of production, is anything provided by nature that helps in the production of output , including goods, services and wealth
what is the payment for land?
rent
define economic rent.
economic rent is any payment made for a factor above its supply price
all payment for land is economic rent
on what factors is the cost of land based?
location, uses, climate, alternative uses
what are the economic characteristics of land?
land is fixed in supply, land has no costs of production, its a non-specific factor of production, the P does not affect the Q available, lack of mobility
why is land considered to be a unique factor of production?
it is fixed in supply & provided free by nature
define derived demand!
when a good is not wanted for itself , but for what it can do/ be used for.
what is the MRP ?
Marginal Revenue Productivity
how much money one can make out of the land
related to the selling price of the finished good
why is the demand for land considered to be a derived demand?
it is not wanted for its own right, but it is sought for the goods it helps to produce.
e.g. physical land is not demanded for its own sake, but for the crops it can grow or the houses built on it
how can we decide who gets the land?
land always goes to the highest bidder, who in turn uses it to earn maximum profit
what factors can influence the price paid for land?
demand for private houses,
road building,
business demand,
public amenities
define government intervention ( in relation to land) !
planning permission to regulate the use of land.
zone land for purposes like agricultural, residential, commercial or recreational uses, historical sites, green belts,…
what factors need to be considered before deciding where to locate a factory ?
labour and wage rates, cost of land, nature of the product manufactured, availability of infrastructure, government influence
how can the government influence a firm where to locate their factory ?
they may provide grants and subsidies for locating in disadvantaged areas, including tax reliefs on profit earning from exporting, building advance factories and developing infrastructur to encourage new start-ups.
they may provide training schemes for the necessary skills for the business
define a weight losing industry!
where the raw materialized is more bulky than the final good.
they will tend to locate close to the source of raw materials
e.g. creameries tend to be close in rural regions and fish processing plants locate near ports
